Can You Buy Your Own Debt?

Buying your own debt for pennies on the dollar might seem like a great way to get out of debt fast. However, you can’t actually do this due to how debt buying works. Debts of this nature are sold in large bundles to debt collectors and other agencies. Learn more about how debt buying works, why it’s not an answer to your debt concerns, and what you can do to handle debt instead below.

In This Piece

How Debt Buying Works

Debt buying occurs when creditors gather old debts—also sometimes called bad debts—into portfolios. They sell these portfolios of debts to debt buyers at a fraction of the original value of the debt. 

For example, imagine a credit card company that has thousands of delinquent accounts. It may gather 1,000 old accounts that are 180 days or more past due. Say the average owed on each of these accounts is $1,000—that would be a total of $1,000,000 in old debt.

The credit card company might sell the debt at a fraction of that value, such as 15 cents on the dollar. In that case, the debt buyer would purchase the debt for $150,000.

Once the debt buyer purchases this portfolio of debt, they can either try to collect on the original debt or sell the debt. In many cases, the debt buyers go through the portfolio, keeping debts they think they can collect and selling off others in a similar method. 

If the debt buyer is able to collect any of the debt, the money is theirs to keep. So, in the hypothetical example above, if the debt buyer collects $250,000 of the original $1,000,000 in debt it purchased, it makes a profit of $100,000.

Why Are Debt Buyers Used?

The reason original creditors use debt buyers is that at some point, they consider debt uncollectible. They don’t want to spend any more of their own resources trying to collect on the debt. They could simply write the debt off and be done with it, but if they sell the debt to a debt buyer, they’re able to recoup at least some of their losses. 

Many common types of debt can be sold to debt buyers. These include but aren’t limited to:

  • Credit card debts
  • Medical debts
  • Unpaid utility bills
  • Debts related to auto loans or mortgages

Can You Buy Your Own Debt?

You can’t buy your own debt because no one sells individual debts. It doesn’t make business sense on either side to do so. Instead, debts are sold in huge portfolios that cover many accounts. It would be difficult to impossible to discover what bundle of debt your debt would be placed in before the lender sells it off, never mind that you would likely pay more than your debt is worth to purchase both your debt and the debt of hundreds of other people.

For the creditor, selling off large sets of old, uncollected debt is a way to write things off the books while getting at least some payment. For the debt buyer, buying a large portfolio of debt at pennies on the dollar is a conservative gamble. Debt buyers hope that by investing in many accounts they’re able to collect money on some of them.

How to Deal With Debt Buyers

Because you can’t buy your own debt, someone else might. Here are some things you can do to deal with debt buyers if they end up holding your old debts:

  • Make sure it isn’t a zombie debtThese are debts that have already aged out of the statute of limitations for collection. However, they’ve risen to the top of a debt buyer’s or collector’s books, and someone is trying to resurrect them. 
  • Negotiate to settle the debt. Debt buyers didn’t buy your debt for full price, so they don’t have to collect the full amount to make a profit. They’re often motivated to settle at less than the amount owed if you could pay them immediately.
  • Stand up for your rights. Your rights as a consumer are protected under federal and state laws. Make sure you understand your rights so you can stand up for them as you deal with debt buyers and collectors. 

Manage Your Debt Better

Managing your debt in a responsible and proactive way can help you avoid debt buyers altogether because you never let your debts get so delinquent they might be sold. Some things you can do to manage your debt include:

  • Creating and sticking to a budget. When you’re spending within your means and making debt decisions that work with your budget, you’re less likely to fall behind on payments.
  • Pay all your debts on time. Use tools such as debt management apps to reduce the chance you might forget a debt or lose track of one.
  • Being proactive with debts. If you find yourself in a position where it’s impossible to keep up with a debt, such as being temporarily unemployed or dealing with a medical crisis, reach out to the creditor immediately. Many creditors have programs and options to help you deal with this type of issue.
  • Know what’s on your credit report. Keep up with your credit report so you don’t end up with old debt you thought was paid off coming back to haunt you. You can get a copy of all three of your major credit reports and track 28 of your credit scores when you sign up for ExtraCredit.

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